U.S. Stocks Fall as Wal-Mart Tumbles While Oil Drops

The yen fell 2.3 percent last week to 81.32 per dollar, and weakened 2.5 percent to 103.60 per euro. Photographer: Kiyoshi Ota/Bloomberg

Nov. 15 (Bloomberg) -- U.S. stocks slipped, keeping
benchmark indexes at the lowest levels in more than three
months, while Treasuries rose for a sixth day as lawmakers
prepared for budget talks and conflict escalated in Israel.

The Standard & Poor’s 500 Index lost 0.2 percent to
1,353.32 at 4 p.m. in New York, led by consumer-staples
retailers after Wal-Mart Stores Inc.’s results disappointed
investors. Ten-year Treasury yields decreased less than one
basis point to 1.58 percent and have fallen 16 basis points
since Nov. 6. The yen weakened on speculation of more
aggressive monetary stimulus. New York-traded crude oil slid
after inventories rose to a three-month high.

The S&P 500 is down 5.3 percent since Nov. 6, the worst
seven-day drop in a year, and Treasuries have rallied as the
elections set up a budget showdown between President Barack
Obama and the Republicans who control the House, pushing the
nation closer to a so-called fiscal cliff of $607 billion in
automatic spending cuts and tax increases. Reports today showed
jobless claims rose more than forecast after superstorm Sandy
hit the East Coast and Philadelphia-area manufacturing shrank.

“You are firmly tucked into the environment where all
things revolve around the fiscal cliff,” said Tom Porcelli,
chief U.S. economist at Royal Bank of Canada’s RBC Capital
Markets unit. “We all knew that over the next few weeks claims
would be greatly impacted by Sandy.”

RSI Below 30

The 14-day relative-strength index for the S&P 500, a gauge
of market momentum, slid to 27.7 yesterday, ending the day below
30 for the first time since June. After June’s two-day dip in
the RSI below 30, which some technical analysts say indicates a
co-called oversold situation, the S&P 500 rallied 15 percent
over the next three months before reaching its peak for the year
on Sept. 14.

Wal-Mart Stores sank 3.6 percent as the retailer’s third-quarter revenue and fourth-quarter profit forecast trailed
analysts’ estimates in anticipation of a competitive holiday
season and after economic conditions slowed U.S. sales gains.
Verizon Communications Inc., AT&T Inc. and Alcoa Inc. also also
dropped at least 1 percent to help lead declines in the Dow
Jones Industrial Average.

Earnings have exceeded analyst estimates at 72 percent of
the companies that reported so far, while 59 percent missed
sales forecasts, according to data compiled by Bloomberg.

Economy Data

Labor Department data this morning showed unemployment
claims surged by 78,000 to 439,000 last week, the most since
April 2011. Reports from Federal Reserve banks showed
manufacturing unexpectedly contracted in the Philadelphia area
while shrinking less than forecast in the New York region. The
cost of living rose in October by 0.1 percent, the slowest pace
in three months and a sign U.S. inflation is in check.

About 90 percent of the drop in the S&P 500 since Election
Day “can be attributed to concerns about the U.S. fiscal
cliff,” Marko Kolanovic, global head of derivatives and
quantitative strategy at JPMorgan Chase & Co. in New York, wrote
in a report today. More swings may be caused today because
derivatives tied to the equity market expire tomorrow.

Volatility Eyed

Concerns about Washington gridlock overlap with tomorrow’s
expiration for options contracts tied to underlying stocks,
which “could cause high intraday volatility” as investors and
traders buy and sell both derivatives and shares to adjust their
positions, Kolanovic said in his analysis. The S&P 500 rose as
much as 0.4 percent and declined 0.6 percent during the session.

Rates on 30-year U.S. bonds decreased less than one basis
point to 2.72 percent, while two-year yields were down less than
one point at 0.24 percent. Ten-year yields traded in the
narrowest range in six weeks.

The Stoxx Europe 600 Index fell 1 percent to the lowest
level in two months as travel companies and retailers led
losses. SBM Offshore NV, GAM Holding AG, and Man Group Plc
dropped more than 5 percent as MSCI Inc. removed the shares from
some of its indexes, meaning funds that track the measures will
sell the stocks. SBM, the world’s biggest supplier of floating
oil and gas platforms, also said it won’t meet its 2012 revenue
forecasts.

An MSCI gauge of emerging-market stocks slid 0.7 percent,
dropping for a sixth day and headed for the longest losing
streak in four months. South Korea’s KOSPI slumped 1.2 percent,
reaching its weakest level in more than three months. The BSE
India Sensex 30 Index dropped 0.8 percent, extending declines to
a fifth day, as the government failed to meet a fund-raising
target in a sale of mobile-phone airwaves.

South Africa’s FTSE/JSE Africa All Share Index retreated
for a third day as platinum shares weighed on the market after
the metal led declines among precious metals traded in London.

Israel, Hamas

Brent crude, the benchmark for European oil, for December
delivery rose 1.3 percent to $110.98 reached a premium of $26 to
New York futures, the widest since October 2011. Brent rallied
as Israel and Palestinian militants exchanged rocket fire and
air strikes and Prime Minister Benjamin Netanyahu said his
military is ready for a “substantial expansion” to halt
attacks from the Gaza Strip.

The worst violence in four years between Israel and Gaza
militants began yesterday when Ahmed al-Jabari, the leader of
Hamas’s military wing, was killed in a missile strike. Israeli
air attacks have subsequently targeted more than 230 rocket
storage or launching sites in Gaza, the army said.

Oil Inventories

West Texas Intermediate oil traded in New York lost 1
percent to $84.45 a barrel after surging 1.1 percent yesterday.
The U.S. government reported inventories increased less than
forecast, gaining 1.09 million barrels last week to 375.9
million, the highest level since July. Stockpiles were forecast
to gain 2.65 million barrels, according to the median of 10
analyst estimates in a Bloomberg survey.

Natural gas, West Texas oil, sugar, soybeans, nickel and
natural gas led declines in 15 of 24 commodities in the S&P GSCI
Index, sending the gauge down 0.6 percent.

The 17-nation euro strengthened 0.3 percent to $1.2770 even
as a report showed gross domestic product in the currency region
fell 0.1 percent in the third quarter. Australia’s dollar
dropped versus 15 of 16 major peers after the Reserve Bank said
it boosted sales of the currency.

The yen slumped to its weakest level in six months versus
the dollar on speculation Japan’s opposition will win elections
next month and advocate unlimited stimulus. The yen depreciated
at least 0.7 percent against all 16 of its major peers. Japan’s
Nikkei 225 Stock Average gained 1.9 percent even as most Asian
equity indexes declined.

‘Add Pressure’

Shinzo Abe, who polls show will become Japan’s premier
after the election, called on the central bank to intensify
measures to counter deflation and the strength of the currency.

“A government led by the Liberal Democratic Party is
expected to win,” said Mitsushige Akino, who oversees about
$600 million at Ichiyoshi Investment Management Co. in Tokyo.
“Investors believe that will add pressure on the Bank of Japan
to ease policy, and the government will adopt strong policies to
get the economy out of deflation.”

Polls showed the Dec. 16 vote will favor Abe, who said
today the central bank’s benchmark rate should be cut to zero or
below and pledged to raise public spending.